John Timpson on handling office affairs, the dangers of over-trading and
managing risk when making a quick purchase of a troubled business.

Q I’ve spotted a budding office romance in the company. I trust the staff concerned to be discreet but should I be worried about the distraction it might cause?

A It all depends on whether it is a romance or an affair. If the liaison is likely to break up a marriage or you are faced with an over-friendly colleague in finance who is flirting with your sales director’s young daughter while she is on a week’s work experience it is wise to have a word before too much damage is done.

In most cases, however, courting colleagues are a normal part of company life. A significant proportion of people meet their partner through work. We have nearly 100 couples working at Timpson, several of whom have paid us one of the greatest compliments in that their children also work for us.

So don’t fret about the odd furtive glance around the filing cabinets, lingering looks over a long lunch in the canteen or even time taken up by the exchange of doting text messages. Love in the office is probably doing more good than harm.

Married couples are such a positive influence at Timpson we help to celebrate every colleague’s wedding with £100 and an extra week off. Karina who got married last weekend was driven to the ceremony by Martin in the car he used to drive me round our shops.

The only time to worry about an office romance is when it comes to an unhappy end. Its difficult for past partners to continue working together and inevitably colleagues take sides. For a few weeks after a break-up the atmosphere may be severely strained, but before long another relationship will blossom and yet again love will be in the air.

Q I’m enjoying strong demand at my phone accessories business, to the extent that I can’t afford to finance the growth. My accountant says I’m in danger of over-trading but I don’t want to turn customers away for fear that they won’t come back. Have you ever had cash-flow problems? If so, what did you do to fix them?

A It is easy to get carried away when you are convinced you have a world-winning idea but everyone needs to face up to reality. Accountants and bank managers can be irritating when they adopt a pessimistic posture and point out the downside of your pet plan. However, they are probably doing you a favour.

Business success is not achieved simply by increasing sales or even by making more trading profit – the only measure that really matters is cash. You are indeed in business to make money. To be over-trading you must be spending more than you are making.

You say, “I don’t want to turn customers away”. That is one of a few dangerous phrases that can lead to commercial suicide. Here

are a few more: “I would be a fool to miss the opportunity”, “you have to speculate to accumulate” and a nasty phrase from the dotcom disasters “first-mover advantage”. In your enthusiasm you can become blind to the risks.

I have been there twice. In the 1980s our shoe shops were starting to eat up so much cash on stock and refurbishment there was nothing left to expand the business. The solution was to sell the chain of shops. In 2003 when we bought our UK competitor Mister Minit – the purchase also included the rundown Sketchley Dry Cleaning business. Sketchley was creaming off £40,000 a week and our overdraft was getting bigger by the day. Again the solution was to sell.

Being strapped for cash is a nightmare – suddenly your fate is in the hands of your creditors and each night you wonder how you got into such a situation.

The lesson is simple – keep control of the cash and never let your ambition run away with your money. That’s why every day I check our company’s bank balance against the same day last year. At a glance it tells me the health of the business.

Q A business I’ve had my eye on has just gone into administration. There’s no time to do the due diligence I would normally want to do, but I’m convinced its customer base would be a huge boost for us. Is it worth buying it and then setting it up as a separate company for a while so I can take a proper look before integrating it with my main business, in case there are any skeletons in the closet?

A When buying a business out of administration act quickly and be prepared to make snap decisions. You must be willing to trust your judgment, without the comfort of due diligence,

but the extra risk is compensated for by a very big advantage – the company comes to you free of most liabilities apart from the Transfer of Undertakings (Protection of Employment) obligations to employees – so don’t waste the chance of having a clean slate by giving a guarantee. You can run the new sales through your old overheads without integrating the two companies.

In my experience companies in administration provide the potential to do some great deals. If you buy a successful business and pay a full price based on a multiple of earnings you have to run really hard to get a return on your investment. The administrator will try to get as much as he can for the creditors but most companies that go into administration are bound to be bought at a rock-bottom price. Even a small price may be too big if don’t have a plan. However, if you have done your homework it is often possible to turn a basket case into a very profitable business.

There will be plenty of time to put your plan into practice before starting to invest new money so have a big economy drive.

Cut costs, lose a lot of overheads and watch the cash. With no contracts tying you down you can renegotiate every deal. Be tough you are in a stronger bargaining position than you think.